OFG Bancorp boosts dividend 16.7%, authorizes $200M buyback
Puerto Rico-based bank returns capital to shareholders as shares trade below analyst targets
OFG Bancorp moved aggressively to reward shareholders on Tuesday, announcing a 16.7% increase in its quarterly dividend alongside a new $200 million share repurchase program that represents roughly 12% of the company's market capitalization.
The San Juan-based financial holding company raised its regular quarterly cash dividend to $0.35 per share from $0.30, according to a Business Wire announcement. The increase lifts the annualized dividend to $1.40 per share, yielding approximately 3.7% at current prices.
Separately, OFG's board authorized a $200 million share repurchase program, the company disclosed in a second statement. Given OFG's current market capitalization of $1.67 billion, the buyback authorization could retire nearly 12% of outstanding shares if fully deployed, signaling management's confidence in the stock's valuation.
The capital return initiatives come as OFG shares have retreated from their 52-week high of $45.46 reached earlier this year. The stock closed Tuesday at $37.73, leaving it roughly 17% below its peak and trading at a price-to-earnings multiple of 8.28 times trailing earnings—well below the typical valuation for profitable regional banks.
"OFG Bancorp Raises Dividend, Authorizes Share Buybacks," MarketWatch reported, highlighting the dual approach to returning capital to investors amid broader banking sector volatility.
Despite recent share price weakness, OFG's underlying business metrics remain robust. The company reported 16.4% year-over-year earnings growth in its most recent quarter, with a profit margin of 32.9% and return on equity of 15.5%, according to market data. The bank's price-to-book ratio of 1.16 times suggests the shares trade near tangible book value, often considered a floor for bank valuations.
Analysts maintain a positive outlook on the stock, with three of the four covering analysts rating it a buy or strong buy, according to data compiled from analyst reports. The consensus target price of $44.40 implies roughly 18% upside from current levels.
Institutional investors dominate the shareholder base, holding 99% of outstanding shares, which could amplify the impact of the buyback program on per-share metrics. Insiders own just 1.4% of the company, leaving significant room for increased ownership alignment through repurchases.
OFG Bancorp operates as the parent company of Oriental Bank, the largest bank headquartered in Puerto Rico. The financial institution provides retail and commercial banking services alongside wealth management solutions, positioning it as a key player in the island's economic recovery and growth story.
The combination of dividend growth and share repurchases represents a significant commitment to shareholder returns. At the new dividend rate, OFG will distribute approximately $60.8 million annually to shareholders, while the repurchase program provides additional flexibility to return capital opportunistically.
Puerto Rico's banking sector has benefited from the territory's economic stabilization following its debt restructuring and the expiration of certain tax provisions that had previously driven an exodus of residents. OFG's focus on the local market provides exposure to this recovery trajectory, while its conservative lending practices have helped maintain asset quality throughout economic cycles.
The dividend increase marks the latest in OFG's history of returning capital to shareholders. The company has maintained consistent dividend payments while growing its book value per share, even as it navigated the unique economic challenges facing Puerto Rico over the past decade.
Investors will watch for implementation details on the repurchase program and commentary from management on the timing of both capital return initiatives when the company reports its next quarterly earnings.